Conceptual and Practical Considerations for Sharing Catastrophic/Systemic Risks

Catastrophic or systemic risks are a major challenge for the farm and food system and rural communities. Private sector markets for sharing catastrophic risks are limited, but less so than in the past. This article presents a conceptual base for understanding why markets for sharing catastrophic risks may be incomplete and/or inefficient. Next, federal efforts to address catastrophic risk losses are reviewed. Finally, new capital market developments are presented and an alternative is introduced where the government would write risk options for specific perils.